The chart above shows the relentless collapse of wages and salaries as a share of GDP over the last 45 years in the US. Around 45 years ago the financial system changed from a relatively natural capital allocation system to one based increasingly on credit allocation through the banking system.

For the economy as a whole, this has been a persistent, pervasive, and pronounced policy disaster. It simply can not get any better until there is once again a complete system change. Incredibly, though, current policy makers remain fully committed to perpetuating this 45 year policy error.

“Central bankers must accept the complete and utter failure of their policies if we are to move forward.” Charles Hugh Smith.

The problem comes down simply to the collapse of natural capital formation.

Unsurprisingly, new business formation has fallen off a cliff

Investment Billionaires have already lost patience.

The constant efforts to boost asset prices and produce a positive spin on the latest economic developments no longer seems to wash with the most successful investment billionaires. Stan Druckenmiller’s views were covered a few weeks ago, but here is Sam Zell.

Sam Zell

Sam Zell is probably the most successful real estate investor of recent decades, and this is what he said in a recent CNBC interview.

“Overall we’ve come off this extraordinary period of liquidity and this extraordinary period of low interest rates… I think we’re unlikely to see a repeat of that going forward, and I think we’re going to see more supply in what had been pretty tight markets.”

“In the most simplistic terminology, I would ask you the question,if something is free, is it valued? Is it appropriately risked?”

“We have distorted markets. Maybe we have bubbles.”

“The problem is I think the Fed should have raised interest rates two years ago, and therefore today would be able to make a much more rational decision as to what to do.The problem is that they’ve so deferred reality for so long that I think they have a serious credibility problem if they don’t raise rates.”

Another multi-decade serially successful investment billionaire is Howard Marks, who is a specialist in credit risk. He clearly felt it was time for a practitioner to express his views on a number of common economic, academic and policy subjects, which seem to have been lost in many current debates.

Tragically current policy makers are not only failing but they are not consistent even with their own favorite indicators. Fed chair Janet Yellen is tightening policy even as her favorite labor market indicator turns the worst for 7 years!

Hedgeye explains:

“… As you can see in today’s Chart of The Day, Janet’s favorite “indicator” is one she calls her “Change In Labor Market Conditions Index.” After being green for, drumroll, #TheCycle… it started to go red (like it always does)… as the US economic cycle had already peaked and rolled.

Since this data series goes back to the 1970s, you can see that the probable outcome (from here) is for the 3 red bars just reported to go really red sometime soon. Does Janet want to be the catalyst in expediting that? When it’s really red, she has to be dovish.”

“Don’t Listen To The Ruling Elite, The World Economy Is In Real Trouble”

A former chief Asian economist for Morgan Stanley explains why there is very little to learn from pronouncements from the ruling elites.

The last desperate push todo more of what failed spectacularlyis forcentral banks to lower interest rates to below-zero: it costs depositors money to leave their cash in the bank. This last-ditch policy is now firmly entrenched in Europe, and many expect it to spread around the world as central banks have exhausted less extreme policies.

The status quo’s primary imperative is self-preservation, and this imperative drives the falsification of data to sell the public on the idea that prosperity is still rising and the elites are doing an excellent job of managing the economy.

Since real reform would threaten those at the top of the wealth/power pyramid,fake reforms and fake economic data become the order of the day.

Leaders face a no-win dilemma:any change of course will crash the system, but maintaining the current course will also crash the system.